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Research Article

A Panel Study on the Survival of Group-Based Performance Pay Systems

Kim, Dongwon

Published: January 2003 · Vol. 32, No. 2 · pp. 379-404
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Abstract

This study conducted two rounds of surveys in 1992 and 1999 targeting establishments that implemented group-based gainsharing plans in the United States and Canada, and analyzed the factors affecting the survival of gainsharing plans using logistic regression analysis. As a theoretical model for the survival of gainsharing plans, the theories of internal fit and external fit developed in the field of strategic human resource management were employed, and a total of five hypotheses were derived and tested. Although there are some exceptions, the main hypotheses of this study appear to be generally supported. Key findings demonstrating the importance of internal fit in gainsharing plans include: (1) the survivability of gainsharing plans was found to increase when implemented in conjunction with participative management programs, and (2) the survival probability of gainsharing plans was found to increase when used together with job-based pay systems. Key findings demonstrating the importance of external fit in gainsharing plans include: (1) custom-designed gainsharing plans tailored to the establishment's strategy and environment were found to have a greater likelihood of long-term survival compared to standardized gainsharing plans such as Scanlon, Rucker, and Improshare, and (2) differentiation-oriented gainsharing plans were found to have a greater likelihood of long-term survival under differentiation business strategies rather than cost-leadership strategies. These results can be interpreted as demonstrating that the fit hypotheses proposed in this study are important for the survival of such programs. Additionally, the theoretical and practical implications of this study were discussed.
Keywords: gainsharingprogram survivalstrategic human resource management